EU Persists in Seeking Light in a Bottomless Pit

For lack of an alternative to the rule of financial markets, UE policies are unable to curb joblessness and to put an end to the debt crisis. And yet European leaders fear one thing only: not to be able to impose austerity any longer...

Puerta del Sol demonstrators are not alone in demanding an alternative policy. Three general strikes were called within a month: in Greece, in Portugal, in Italy. To which must be added countless branch movements in many sectors. Nearly 50,000 public servants joined the marches in Prague last Saturday. European leaders fear one thing only: not to be able to impose austerity any longer, the only policy they can think of. Already certain economists voice fears that, confronted with the governmental party’s defeat in the local elections and the popular protest, Madrid should be tempted to loosen its austerity measures and renege on the objectives it has set regarding the reduction of the national debt.

Neo-liberal recipes no longer go down. Budgetary austerity squeezes the destitute dry. Wage restraint policies are not palatable. And they damp demand, hamper growth, and so make it more difficult to reduce the public debt. Leaving financial markets hungry for more profits. The rating of the Belgian debt was placed under negative surveillance last Monday by the Fitch rating agency; after Standard and Poor’s had done the same with the Italian debt on the previous Saturday.

The rating agencies’ decisions in the past have pushed up interest rates for State loans. Greece, Portugal, or Ireland found themselves strangled for lack of money and eventually begged the EU and IMF for help. What they got was a loan from the European financial stabilization Fund that was set up last year. Greece had a negative growth rate of minus 4% last year.

Another policy is necessary: the stimulation of demand, incompatible with wage restraint policies, and the creation of qualified jobs. Whether jobless or too qualified for their jobs, Puerta del Sol young graduates express the need for an alternative.

The European Left seeks to free the financing of national debts from the rule of financial markets. This organization, of which the forces that constitute the Left Front in France are members, proposes setting up a social development Fund that could lend money to States at very low interest rates, far lower than those found on the market, by allowing the ECB to create money. Loans would be granted on condition that the money go to the development of public services, to public investments that create jobs and infrastructures, develop education, vocational training and research, and protect the environment. The very opposite of current recessionary policies.

What is at stake here is respect for workers and above all, the possibility of an efficient economic policy. For in the meantime the EU is heading straight for disaster. The national debts crisis might have devastating effects on banks, notably French, German, Greek, Portuguese banks – which have piled up Greek or Portuguese securities in their coffers. As in 2008, banks might stop trusting one another, and lending one another money, or issuing companies with loans. Should this happen, States this time would be at a loss to buoy them up.